Cost concerns have put on hold a final investment decision (FID) at the Dorado field in the Bedout Sub-basin offshore Western Australia by operator Santos and its joint venture partner Carnarvon Energy.
Santos said in its second-quarter earnings results that the inflationary cost environment and supply chain uncertainty do not support FID for the project this year.
Dorado is an integrated oil and gas project that is planned to be developed in two phases. The initial development involves the production of oil and condensate through a wellhead platform (WHP) and floating production, storage and offloading (FPSO) facility.
Santos’ partner, Carnarvon Energy, reported that the front-end engineering and design (FEED) work is substantially complete and the development is close to FID.
However, the company noted that the main outstanding matter is the finalisation of the engineering, procurement and construction contract for the FPSO, which represents more than 50% of the expected project cost. It added that the JV has been working with the contractor to ensure the contract is in an acceptable form, which requires the cost environment to be more stable.
“Given the current regional inflationary pressures and supply chain challenges, the risk of cost escalation is unacceptably high and requires fiscal discipline until this environment shows signs of stabilising,” said Adrian Cook, Carnarvon’s managing director and CEO.
Santos holds an 80% interest in the Dorado project and is the operator. The remaining interest is held by Carnarvon.